Unions respond to public sector cutbacks

EIRO Online, [6] October 2003

In its June 2003 coalition agreement, the Netherlands’ new
government announced major spending cuts affecting government
departments, which will result in public sector job losses and wage
restraint. Trade unions representing civil servants are fiercely
opposed to the plans and question how the proposed job cuts can be
consistent with the government's promises on improved public safety,
care and education. The unions also claim that the planned wage
restraint will further damage the public sector's ability to recruit
and retain suitable qualified staff.

In its June 2003 coalition agreement, the new government of the
Christian Democratic Appeal (Christen Democratisch Appèl, CDA), the
liberal Party for Freedom and Democracy (Vereniging voor Vrijheid en
Democratie, VVD) and the social liberal Democraten 66 (D66), led by
Prime Minister Jan-Peter Balkenende, highlighted the poor economic and
budgetary situation in the Netherlands. It refers to a
dramatically deteriorated position, not only as a result of the
worldwide economic downturn, but also as a result of a number of
structural economic characteristics peculiar to the Netherlands. In
his statement of the coalition government's policy, the Prime Minister
pointed to spiralling pension costs and high wage costs in comparison
with other countries. This, he stated, could mean that when the global
economy finally does pick up, the Netherlands may miss out.

The government plans to respond to the recession by implementing a
package of rigorous spending cuts and increasing the burden of
taxation and contributions in a bid to restore budgetary balance by
2007. This approach goes against the views of many economists, who
call for continuing investment, especially at times of economic
hardship, or at least for finding a better balance between investment
and cuts. From this perspective, it would be sufficient to comply with
the budgetary conditions laid down by EU Economic and Monetary Union
(EMU) and simply learn to live with the remaining budget deficit for
the time being. Lodewijk de Waal, the chair of the Dutch Trade Union
Federation (Federatie Nederlandse Vakbeweging, FNV) and his
counterpart at the Christian Trade Union Federation (Christelijk
Nederlands Vakverbond, CNV), Doekle Terpstra, are even calling for the
adoption of more stringent EMU budgetary conditions.

Many of the spending cuts announced by the government affect
employment and wages in the public sector. On the latter point, the
government agreement states that, over the coming four-year period,
cabinet will cut the funding available for pay and conditions in the
public sector by one percentage point annually, in relation to the
current medium- to long-term forecast. Because, in addition, higher
pension contributions will have to be covered by employees, at least
in part, this effectively implies a wage freeze. The government will
also decrease spending on ‘incidental’ wage increases by
EUR 510 million.

There is still uncertainty over how many jobs will have to be cut
under the government's plans to streamline government
departments. Neither the June 2003 coalition agreement nor the policy
plans presented on ‘budget day’ (the third Tuesday in
September, when the Queen traditionally reveals the government's
policy plans in her speech) provide any clarity in this regard. The
plans include reducing the number of staff and achieving the same
objectives using less money (through efficiency gains) across the
board for all ministries. According to Johan Remkes, Minister of
Internal Affairs, the question of how many compulsory redundancies
will be necessary in the years ahead ‘cannot, however, be
answered at this point in time’ . Nonetheless, it is clear that
the largest cuts will affect the Ministry of Defence, where staff
numbers must be reduced from 72,000 to 65,000.

The trade unions have come up with figures for the likely job losses
on the basis of the planned cutbacks. The day after ‘budget
day’ , Abvakabo, the civil servants' union affiliated to
FNV, stated that, as a consequence of the government's plans,
50,000 jobs would be at stake.

Trade union criticisms

In response to the government's plans, the trade unions have argued
that it would be unfair to impose the negative consequences of the
economic crisis one-sidedly on public sector employees and called for
good redundancy plans to be drawn up in the event of compulsory job
losses. Furthermore, they have complained that wage ceilings imposed
in advance will unacceptably limit the scope for negotiation in future
public sector collective bargaining. However, beyond these normal
industrial relations arguments, the unions have also specifically
raised a number of questions about the role and functioning of the
public sector, which they believe should be satisfactorily addressed
before announcing staff and spending cuts.

The union's key question on this point concerns the definition of the
public sector's tasks. The civil servants' unions affiliated to
both FNV and CNV have for some time been calling for a debate to
determine which tasks the public sector should continue to carry out
and which—due to cost considerations—it should ‘hive
off’ . Only based on the outcome of this debate should it be
decided how many civil servants are needed to carry out the agreed
tasks and how many jobs, if any, could therefore be cut. The trade
union's approach has been given support by the leading governmental
legislative and administrative consultative body, the Council of State
(Raad van State), which, in its recommendation on the government's
draft 2004 budget, asserts that if ‘decisions on volume and
efficiency gains are made without political choices having been made
on reducing tasks that will no longer be carried out by the government
bodies themselves, this would lead to overwork’ .

The unions state that no discussions are taking place on these issues
and that instead the politicians are making numerous promises to the
country's citizens, such as more police on the streets, cuts in
waiting list for healthcare and better education. Furthermore, it is
claimed that the public is demanding a better implementation of
government policy, which currently leaves much to be desired. Studies
carried out by the Audit Office (Algemene Rekenkamer) indicate that
government pays considerable attention to formulating policy but much
less to ensuring execution and results (Tussen beleid en uitvoering -
lessen uit recent onderzoek van de Algemene Rekenkamer [Between policy
and implementation—lessons from recent research carried out by
the audit office], 2003). Dissatisfaction is reportedly growing among
the public about public service quality and, according to research
conducted by the Social and Cultural Planning Office (Sociaal en
Cultureel Planbureau), this is partly the result of ongoing changes
within the organisation of government ‘which certainly
contributes little to effective policy’ (Sociaal Cultureel
rapport [Socio-cultural report], 2002).

The unions argue that more tasks and better and swifter task execution
require more civil servants rather than fewer, a view which is
supported by the increased level of government expenditure on external
employees. ‘The greater workload and relatively low percentage
of civil servants serve to significantly push up spending on external
staff and costly policy advice,’ according to the leader of the
Abvakabo union.

The government's argument that job cuts could be achieved by
reducing the level of bureaucracy is dismissed as fiction by the
unions. First, they question the idea of that the Dutch public sector
is inefficient, comparing the size of the Dutch public sector with the
situation in other European countries. Figures published by the
Organisation for Economic Cooperation and Development (OECD), suggest
that in 2000 the Dutch public sector represented 10.5% of all
employment, a lower figure than in almost all the other countries in
Europe (Highlights of public sector pay and employment trends: 2002
update, 2002). Another trade union argument is that bureaucracy does
not hinge on people but on rules and regulations, procedures and
organisations. According to the unions, it is not the employees that
should be made redundant, but the rules that should be
tackled. Furthermore, agreements should be clarified and organisations
should be made more transparent.

Simply cutting civil service jobs without first gaining sufficient
insight into the tasks to be carried out by the public sector has been
dubbed a ‘cheese slicing’ operation by the unions, in that
jobs will be trimmed throughout the sector and the fewer workers that
remain will have to do the same amount of work. This will increase the
workload and absence will rise, it is argued, leading ultimately to
erosion of service quality.

Public sector employment

With regard to the government's planned public sector wage
ceiling, the trade unions warn that a further erosion of pay prospects
in the public sector would have a negative effect on the image of the
public sector as an employer, over and above the unacceptable
consequences for the employees themselves.

In February 2001, the Ministry of Internal Affairs issued a committee
report (known as the Van Rijn report) entitled ‘The job market
in the public sector. Investing in people and quality’ (De
Arbeidsmarkt in de collectieve sector. Investeren in mensen en
kwaliteit), which contained an analysis of labour market issues
affecting the public sector and put forward solutions for the problems
identified ( NL0104129F). This was seen as necessary at the time
because the government was having great difficulty in recruiting and
retaining suitably qualified personnel, to such an extent as to pose a
threat to public service provision.

While continuing economic growth at the time was singled out by the
Van Rijn committee as one of the important causes of public sector
staff shortages (as it resulted in a tight labour market), reference
was also made to the influence of other developments of a more
permanent character that would not go away even if economic growth
were to slow, such as:

an ageing population with diminishing numbers of young employees
(especially relevant for the public sector given its high
percentage of older employees);

increased labour shortages due to early retirement schemes,
working time reductions and an increased influx of people into
unemployment and occupational disability; and

decreased availability for work as a consequence of shifting
social norms and values concerning the combination of work and
other matters of importance in people's lives (such as care,
leisure activities) and due to longer training requirements.

The Van Rijn committee proposed adopting measures and making
investments directed at improving the position of the public sector in
the employment market, which also includes improving career
opportunities. A 2002 report on the image of the public sector as an
employer by researchers from the Organisation for Strategic Labour
Market Research (Organisatie voor Strategisch Arbeidsmarktonderzoek,
OSA) highlighted the necessity for investment in the financial and
material aspects of working for the public sector (Het Imago van de
Publieke Sector als Werkgever [The image of the public sector as an
employer], WF van Raaij, H Vinken and LPM. van Dun, OSA publication
184, 2002). In addition to improving career prospects, OSA also
explicitly mentioned wage improvements.

The unions now state that the spending cuts proposed by the government
will undo what has been achieved on the basis of the investments
resulting from the Van Rijn report, because the public sector will be
set back years in terms of wage trends in relation to the market
sector, once again tarnishing the public sector's image in the
labour market. This too will ultimately diminish service quality, it
is claimed.

Commentary

In their response to the proposed cutbacks in the public sector, the
trade unions representing civil servants have not only drawn attention
to the legitimate interests of civil servants—such as the right
to a reasonable income, job security and leeway for wage
negotiations—but also entered the broader debate on the role and
functioning of government. This relates to developments that are more
or less isolated from economic trends, such as the need for
sufficient, properly qualified employees in order to continue to
guarantee good services. The ‘task definition debate’ too
is in principle not linked to the broader performance of the economy,
although the need to prioritise in the face of a more limited budget
is certainly becoming more pressing.

The findings of various studies would seem to support the views of the
unions. The Audit Office indicates that policy is to a large extent
not implemented properly, if at all, and reports published by the Van
Rijn committee and the OSA support the unions' wage claims. While
it would be wise to point out that the research findings are far more
nuanced than merely calling for more staff and better pay—after
all, the rift between policy and execution could also be attributed to
poor communication, bureaucratic procedures or rapidly changing policy
objectives, and the image of the public sector as an employer depends
on more factors than wage considerations alone - the trade unions
nevertheless have definitely struck a chord here. In so doing, they
extend the interests of their membership to all Dutch citizens who
wish to make use of services offered by government. Because the unions
combine reasonable wage demands with the possibility that government
may hive off tasks and therefore jobs, they furthermore show
themselves to be open to the government's argument that spending
cuts are unavoidable. (Marian Schaapman, HSI)